The Devil of the Double Killing of Stocks and Debts: Five Details of January Financial Data

On Thursday, February 10, 2022, the central bank released social financing data for January, which far exceeded previous expectations. As soon as the data came out, I paid attention to several WeChat groups dominated by marketers. Everyone said in unison: Where did all the money go? who got it? On the second day, the capital market staged a double killing of stocks and debts, and Tianliang Society merged into the most embarrassing background board.

There are two completely different interpretations of the continuous decline of the Shanghai and Shenzhen stock markets since the beginning of the year. One is the normal fluctuation of the market, and the other is a reflection of the pessimism about the economic outlook. Considering that this decline has lasted for one and a half months, it is difficult to simply say that it is a normal fluctuation, and we have to consider the pessimistic expectations contained in it.

January's financial data, for being too dramatic, provides an excellent sample for analysis. On the one hand, the total volume far exceeded expectations, on the other hand, the capital market was completely unmoved, and both stocks and bonds fell. Decomposed carefully, several details are intriguing.

First, a large amount of funds went to government-led departments.

The increase in social financing in January was 6.17 trillion yuan, an increase of 984.2 billion yuan year-on-year, far exceeding market expectations. However, if you look at the whereabouts of funds, most of them go to government-led sectors, including central government bonds, local government bonds, state-owned enterprise bonds, platform bonds, and state-owned enterprise loans.

The increased social financing of 984.2 billion is mainly divided into three parts: government bonds of 359.8 billion, corporate bonds of 188.2 billion, and RMB loans of 394.4 billion. Most of the corporate bonds are state-owned enterprise bonds and platform bonds. Many of the RMB loans are related to infrastructure projects since the beginning of the year, and they also flow to government-led departments. In general, very little new capital flows to private enterprises and the residential sector.

In the process of stabilizing growth, it is only right for the government-led departments to exert force, and it is understandable in itself. However, private economic entities do not exert their strength, and there are hidden concerns about economic vitality. In particular, the government-led departments are inefficient, the flow of funds is slow, and there are few employment opportunities, which is not conducive to the further vitality of the economy.

Second, the short-term credit funds are obvious.

In January, RMB loans increased by 3.98 trillion yuan, a year-on-year increase of 394.4 billion yuan, which is an important contribution to the growth of social financing. However, the increase in loans mainly came from short-term credit, including an increase of RMB 319.3 billion in bill financing, and an increase of RMB 203.7 billion in short-term loans, adding up to RMB 523 billion, which exceeded the total increase in loans. Loans decreased by 142.4 billion yuan, and loans were obviously short-term. Short-term lending itself is not terrible, but the sustainability of credit growth is questionable.

3. Resident loans have been greatly reduced.

The decrease in long-term credit was mainly due to the decrease in medium and long-term loans to residents. In January, resident medium and long-term loans increased by 742.4 billion yuan, a decrease of 202.4 billion yuan year-on-year, mainly due to the drag of housing loans. Against the background of housing and housing speculation, the Evergrande incident, rising property taxes, and the lack of real estate to stimulate the economy, the real estate market has entered a period of consolidation, and it is difficult to change in the short term. It is expected that medium and long-term loans to residents will continue to be weak.

Fourth, M1 does not rise but falls.

In January, M2 increased by 9.8% year-on-year, 0.8 and 0.4 percentage points higher than the previous month and the same period last year. However, M1 did not rise but fell, down 1.9% year-on-year. According to the calculation of the central bank, this is related to the Spring Festival factor. After adjustment, it increased by 2% year-on-year, but it was still 1.5 percentage points lower than the previous month.

The so-called Spring Festival factors are mainly because companies need a lot of funds to pay salaries and benefits before the festival, and the unit demand deposits are transferred to personal deposits, and personal deposits are included in M2 and not included in M1.

However, even after the adjustment, the growth rate of M1 is only 2%, which is a very low number. The current deposits of M1's main enterprises and institutions are current funds for production and operation, which directly reflect the enthusiasm of enterprises for operation. The one-month data may be accidental, and it cannot explain too many problems. It is expected that the M1 growth rate will rebound.

5. The growth rate of the balance of deposits and loans both went down (not up).

At the end of January, the balance of RMB deposits was 236.07 trillion yuan, a year-on-year increase of 9.2%, and the growth rate was 0.1 and 1.2 percentage points lower than the end of the previous month and the same period of the previous year, respectively.

At the end of January, the balance of RMB loans was 196.65 trillion yuan, an increase of 11.5% year-on-year, and the growth rate was 0.1 and 1.2 percentage points lower than the end of the previous month and the same period of the previous year respectively.

The decline in the growth rate of deposit balances may be due to the Spring Festival, but in the context of the huge amount of social financing, the decline in the growth rate of loan balances is a bit puzzling. Still looking forward to next month's deposit and loan data, there will be signs of reversal.

These five details show some hidden worries in the process of economic stabilization, at least not as beautiful as the aggregate data. The single-month data is contingent and cannot explain too many problems, especially due to the Spring Festival factor, and it is necessary to continuously observe the performance of the follow-up data.